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The Determination of the Date of Bankruptcy Following the Filing of Assignment Documents

July 2002

Background

On September 5, 2001, Registrar Sproat of the Ontario Superior Court of Justice rendered a decision in the matter of the bankruptcy of Winston Leopold Copeland in which she indicated that the date of a bankruptcy was the
date of the trustee's appointment and not the date on which the assignment
papers were sent to the office of the Official Receiver.

The decision in the Copeland matter caused the Office of the Superintendent
of Bankruptcy (OSB) to rethink the question of the filing of assignment
documents, the role of the Official Receiver in examining and accepting these
documents, and the determination of the date of the bankruptcy. After
consulting with OSB division offices, we noted that since the advent of the fax
machine, different practices have developed such that there may be some
ambiguity in determining the date of bankruptcy. In addition, this issue had
to be considered in the context of electronic filing. We have therefore
determined that it would be appropriate to develop and communicate a position
intended to ensure consistency in the determination of the date of bankruptcy
so as to provide greater certainty to the various stakeholders in the insolvency field.

Position

There are two stages for determining the date of bankruptcy: the first is
the filing of documents with the OSB by the trustee and the second is the
examination and acceptance of the documents by the Official Receiver. This
position therefore implies that the Official Receiver must examine the
documents filed before a bankruptcy can exist. This rests on the wording of
section 49 of the Bankruptcy and Insolvency Act (BIA), which
distinguishes among the various stages of the assignment process. Furthermore,
like the Act, paragraph 6 of Directive 9 on Fax Utilization, recognizes the
examination of the documents by the Official Receiver as a prerequisite to his
acceptance (or refusal, as the case may be). Once the Official Receiver has
examined the documents and satisfied himself that everything is in order, he is
to accept the assignment. The date and time of bankruptcy will therefore be at
the instant that the assignment is accepted by the Official Receiver.

Another aspect to consider is the appointment of the trustee. The
certificate of appointment of trustee (Forms 19, 20 and 20.1) includes a
reference to the date of bankruptcy and another date that precedes the Official
Receiver's signature at the bottom of the form. Henceforth, with the exception
of rare cases, the date of the trustee's appointment will correspond with the
date of the bankruptcy. This appointment is essential if the trustee is to be
in a position to act. Forms 19, 20 and 20.1 will therefore be amended to
provide for the trustee's appointment, by the Official Receiver, at a date and
time that will generally correspond with the date and time of the
bankruptcy.

The main implications of this new position are as follow:

trustees can no longer consider a bankruptcy to exist as soon as
the documents are received in the Division Office:

the documents must first be examined by the Official
Receiver, and then accepted, if they are in order;

the Official Receiver will then proceed to the
appointment of the trustee, and at that moment, the latter will be in a
position to act;

it will be easier to determine whether third parties have
enforceable rights against the trustee.

It should be borne in mind that the OSB service standard for the
registration of documents is 48 hours from the receipt of the documents and
that the Office's business hours are from 8: 30 a.m. to 4: 30 p.m. Monday to
Friday. Assignments will only be accepted within business hours with the
exception of urgent cases. In urgent cases, trustees may communicate with the
Official Receiver during business hours and make other arrangements at the
Official Receiver's discretion.

The necessity to establish and to communicate an internal procedure aimed at
ensuring consistency in dealing with assignments filed with our office is based
on the fact that the OSB is not in operation 24 hours a day. However, in the
context of e-filing, things will be different. The main principle will remain,
i.e. there will still be the acceptance stage required for a bankruptcy to
exist, but instead of the assignment being physically accepted by an Official
Receiver, the assignment will be accepted by the computer based on pre-set
acceptance criteria. Since the computer system will likely allow for the filing
of assignments 24 hours a day, e-filed assignments could consequently be
accepted at any time of the day. However, assignments filed by any other mean
will continue to be accepted only during the above mentioned business hours
with the exception of urgent cases.

If you have any questions about this document, please contact the OSB in
your area.

OSB Division Offices will begin applying this position as of July 15, 2002.